E-Business Key To Automotive Suppliers' Success, Survey ShowsE-Business Key To Automotive Suppliers' Success, Survey Shows

The push for adoption of E-business tools by automotive suppliers is taking on a new intensity, according to a Center for Automotive Research study of the E-business readiness of suppliers. Lower-tier suppliers who don't move quickly to prepare for doing business over the Internet may be the first casualties.

The study, E-readiness of the Automotive Supply Chain--Just How Wired is the Supplier Sector?, finds that 77% of tier-one automotive suppliers expect the number of lower-tier suppliers they use will shrink significantly over the next year. A deciding factor in the survival of lower-tier suppliers is their ability to do business over the Internet, according to the study released Monday.

The results of the study show that 15% of tier-one suppliers, generally considered the 150 largest suppliers, currently expect their suppliers to do two-way E-business, but 77% will require their suppliers to do business electronically within three years.

The study also shows that capital expenditures on E-commerce tools by tier-one suppliers will increase markedly over the next three years. Tier-one suppliers that responded to the survey say E-business tools account for approximately 3% of capital expenditures today but will increase to an average 13% in the next three years. The survey focused on 16 North American tier-one suppliers with average sales of $4.4 billion.

Dave Caruso, AMR Research analyst, says there is little question that Tier 1 suppliers are demanding that their own suppliers begin to do business electronically as quickly as possible because using E-business tools for replenishment is much cheaper than the administrative costs of using fax, phone ,and paper. "Supplier visibility is taking off like a rocket in Detroit--the trend is really clear," says Caruso.